Sunday, 31 August 2014

Breathtaking complacency on railway funding

The recent disclosure that it could take Scottish Borders Council 117 years to raise the £8.75 million it needs to pay its share of the Borders Railway from house-builders development contributions might have triggered concerns in some quarters, but certainly not within local government circles.

It has taken all of ten years to collect the first £750,000 at a snail's pace average of £74,000 a year which means the outstanding £8 million needs to be garnered in the remaining 24 years allowed under the scheme's business plan.

Unless there is a housing boom of unprecedented proportions sometime soon then at some point the severely cash-strapped council will be forced to take money from its diminishing collection of services and budget heads to meet its railway commitments. A contingency plan is surely a minimum requirement, and council taxpayers should be told where the money will come from should the construction industry fail to fulfil its role as a cash cow.

But in a statement oozing complacency the council's has obviously refused to accept it has a potentially serious financial issue on their hands. According to their man: "The Borders Railway will boost economic activity in the Central Borders. As a consequence it's anticipated there will be an increase in house-building to accommodate a population increase. As the railway is not yet running it is too early to judge how this will turn out in practice - ie over what period we will see more housing contributions."

He went on to concede there had been a slowing down in housing completions in the Borders. But inevitably the slow-down would be followed by growth as the economy recovers. He added: "It is a bit early to get alarmed about underpayment."

There's an unswerving belief within council ranks that even if the levy on new houses lets them down money will be no object. The council's gross budget will be £10 billion over the next 30 year, they argue, so there's loads of scope for wriggle room. And in any case the council is allowed under a legal agreement signed with Transport Scotland to re-phase the annual payments due should the developer contributions not match expectations.

Just two days after the statement predicting an upturn in house-building the Galashiels-based local director of DW Hall, a national firm of chartered surveyors, revealed that the impending delivery of the £350 million Waverley Railway had so far failed to have any dramatic or even discernible effect on Borders property values.

He wrote in his blog: "Local opinion is strongly in favour of the new link, but this has not translated into a general uplift in prices. The significant interest when the project was announced in 2004 appears to have developed into a wait-and-see approach and the likelihood of price increases seems to have been postponed until the line and stations are actually up and running.

"Where the line has had an effect is on seller expectations. Recent prospective sellers in the railway 'catchment area' have been disappointed that their properties have not appreciated as much as they anticipated and in many cases they are selling at or below home report valuation."

Hardly a ringing endorsement for the railway's likely impact on the housing market.

In fact local property prices have a very long way to travel just to get back to 2007 levels. According to the home.co.uk website the average asking price for detached houses in Galashiels has decreased by 21% in the last seven years to £225,183 while flats are down by 43% to £83,800 with the average for all property sales in the town dropping a massive 61%.

There's been little sign of a recovery even in the last twelve months with asking prices for detached properties pitched 15% below August 2013 levels, semi-detached homes down by 9% and flats by 4%. Under those circumstances the construction of new private homes accompanied by the council's £1,734 developer contribution, may not prove to be such an attractive proposition.